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South Africa Retirement Trends in 2020

The South African pension system is made up of a non-contributory, means-tested public benefit program alongside pension and fund arrangements as well as voluntary savings.

The old-age grant provided by the government under pillar one is the main source of income for nearly 75% of South Africa’s elderly population. In terms of employer-based retirement plans, the system has been in place since 1056 when the Pension Funds Act was passed, although they’re limited to those employed in the formal sector.

Unfortunately, many South Africans are unable to access affordable retirement funding plans due to the country’s economic structure. South Africa’s unemployment rate is relatively high and a substantial part of the working-age population is informally employed.

SA Retirement Trends

In the 10X Retirement Reality Report (RRR19), the full extent of South Africa’s private retirement savings situation was on full display. The headline statistic of the report was that out of 15-million economically active South Africans, 67% have no retirement plan.

The clear message from respondents was: there needs to be more emphasis on saving and exactly how much is needed. The report also highlighted that across the South African demographics:

  • 72% of those who have a plan are concerned they will not have enough saved to live on
  • 77% of those who do have a plan, accept that they will need to continue earning an income after they retire

Outside of this report, there’s a number of other common trends prevalent across South Africa.

30% of South Africans have no formal retirement savings

While it’s positive that more people have retirement savings than in 2013, the number of South Africans without any proper retirement savings still stands at 30%. Findings by the Organisation for Economic Co-Operation and Development (OECD) have found that employees that retire today can expect half the income of those who retired in 2000, due to the current low growth/return environment.

Also consider that 8% of South Africa’s population is over the age of 60 and that retirement age is generally considered to be 60 or 65. With the government grant system for the elderly already under strain with 3.1 million recipients, it’s likely that an increase to 7 million people by 2030 will be an incredible burden.

Many Can’t Afford to Retire

Excluding those that belong to an employer retirement fund, 58% of people say they will continue to work after retiring from their jobs. This, as you’d expect, is down to not having enough savings, having to care for ageing parents or adult children.

With advances in technology and medicine extending lifespans, it’s expected that the average person may need to prepare for 20 years of retirement if they retire at 65. For South Africans, it’s first and foremost vital to start considering retirement planning. Old Mutual rightly suggest inflation-beating investments for securing your financial future – whether you want to retire early or you’re simply planning to supplement a state pension.

This is typically why South African investors are looking overseas for their next investment, using international markets to build returns that can supplement their later life. Property is particularly preferred by South African investors because it can deliver robust returns over the long-term.

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